Flipkart, Amazon's fortunes may ride on smartphones

Picture source: ThinkStockStirring smartphone sales through sharp discounts and offers could play a major role in the success of Flipkart and Amazon in 2017, with the two fighting it out for a larger share of the segment, which contributed a fourth to the sector’s merchandise value in 2016.

According to Counterpoint Research, Flipkart led the online smartphone sale market in 2016, and as per preliminary data, it has sequentially widened its lead over Amazon — 59% compared with 29% — in the first quarter ended March 2017.

Amid their tussle for a larger share of the smartphone pie, the two etailers are also giving an extra push to stimulate demand for the segment whose contribution to overall sales has stagnated at around 33%. More so, since market watchers predict overall sales growth of the devices to be flat to marginal this year. They also need to counter additional competition from handset makers launching their own phone selling portals such as Xiaomi’s mi.com.

Thus, breaking the trend of holding just one Big Billion Day or Great Indian Sale a year close to

Diwali, the e-commerce leaders have brought in massive discounts early this year.

​Smartphones were among the first electronic devices to be sold online through the portals. “The success of the online players depend to a large extent on the success of smartphones in 2017,” said Pavel Naiya, senior analyst at Hong Kong-based Counterpoint Research. “This is an attempt for Amazon and Flipkart to deal with the seasonal slow movement in the online market, and right now, smartphone is one of the key segments for online sales.”

Smartphones contributed close to 25% of the overall GMV (gross merchandise value) of the e-commerce sales through 2016, and is expected to remain at similar levels in 2017, he added, highlighting the criticality of the segment to the e-commerce majors. Flipkart said the category contributes to half of its overall revenue while Amazon declined to give the detail.

In smartphones, online was growing rapidly over the past couple of years, and smartphones were the biggest driver of customers to sites like Flipkart, Snapdeal, Shopclues and Amazon.

But over last year, online sales have appeared to have hit a ceiling of around 33% share of the overall market in India by volumes.

One of the key challenges that etailers face is adding new customers amid the limited access to the internet to make purchases online — about 300 million Indians using the internet on the smartphone and much lesser over desktop — in a market that has traditionally been dominated by brick and mortar stores, usually referred to as offline retail.

Further, the established e-commerce players are facing competition from brands using their own websites to sell their devices. “Players like Xiaomi have started selling their devices on their own portals, which is giving competition to all etailers especially in the smartphone segment. They are (Mi.com) now among the top five etailers,” said Jaipal Singh, senior analyst at International Data Corporation (IDC) India.

Amazon, which had its Great Indian Sale from May 11-14, feels it has figured out the solution to attracting new customers, as it witnessed the “biggest day for smartphones in the year so far”. The company was giving a variety of discounts, from Rs 1,000 off on Coolpad phones to 40% off on Motorola phones.

“On Day 1, we saw significant new customer acquisition through smartphones, with a huge increase in first-time customers purchasing smartphones on Amazon,” said Manish Tiwary, vice president of category management at Amazon India. In 2016, smartphone business for Amazon India website grew over 135% and by units, it grew over 150%.

“In the sale so far, smartphones have been among the top three categories in terms of sale. On Day 1of our current sale, the performance of smartphones saw a jump of 7X over normal days,” Tiwary added.

Flipkart’s Big 10 sale, which will be on from May 14 to 18, will have assured buyback scheme to lure customers. The buyback value will be 35-50% of the value of the device.

Flipkart’s senior director of smartphones Ayyapan Rajagopal expects to more than double smartphone sales, as nearly half the phone models during the sale priced between Rs 10,000 and Rs 80,000, will have the buyback offer.

“All affordability programmes put together will be able to give us 40-50% uplift (in market share) in the next six months, and this will rub off on the revenue,” he said.